Monday, 15 July 2013

The tax increase that changed British beer

The budget in 1931 had a huge impact on British beer. It was an attempt by the British government to raise more cash in response to the worldwide slump that follwed th stock market crash of 1929. It didn't work out anything like chancellor Snowden hoped.

The tax on a standard barrel of beer (36 gallons of beer with an OG of 1055º) had been 80 shillings since 1924. Quite a long period, by modern standards. In 1931 it was increased to 114 shillings, which raised the average price of a pint from 6d to 7d. At a time of high unemployment and stagnant or even falling wages, what happened is no surprise. Consumption fell.

"BIG DROP BRITISH BEER PRODUCTIONDecrease of Three-quarters of a Million Barrels in Six Months.
A decrease of over three-quarters a million standard barrels of beer produced in the first half of this year, compared with the first half 1930, is indicated in a written answer to the Chancellor of the Exchequer in a written answer to a question put by E. Winterton (Lab., Loughborough).

Mr Snowden states : The number of standard and bulk barrels of beer produced in Great Britain and Northern Ireland during the half-years ended June 30, and 1931, respectively, and during the months of July and August, in the years 1930 and 1931, was as follows

Two things buggered the amount of tax collected: a fall in consumption and a fall in gravity. Rather than increase the price of mass consumption beers such as Mild, brewers simply lowered the gravity so they sould sell it at the same price. The average gravity of Mild dropped from 1043º to 1037º.

After two years the government reversed the increase, but the damage had been done. Rather than raise the gravity of Mild back to the 1930 level, brewers merely reduced the price from 6d to 5d. Which meant that the tax generated fell even more in 1934.

By 1938 production levels had returned to a similar level to in 1930, but, because of the fall in average gravity, tax receipts were still lower. It was only when the tax was increased in 1940 to 104 shillings a standard barrel that the sum generatedexceeded that of 1930.

UK beer production and tax receipts 1930 - 1940

Total
Tax £

bulk
barrels

standard
barrels

average
OG

1930

71,254,674

25,061,956

19,550,867

1042.9

1931

69,269,299

23,900,213

1042.54

1932

68,710,020

20,790,812

15,514,209

1041.04

1933

67,097,581

17,950,303

12,658,324

1039.52

1934

53,884,405

20,182,308

15,043,120

1040.99

1935

53,582,335

20,864,814

15,577,836

1041.06

1936

55,451,926

21,969,763

16,386,985

1041.02

1937

57,318,585

22,724,450

16,985,231

1041.1

1938

61,241,404

24,205,631

18,055,539

1041.02

1939

62,370,034

24,674,992

18,364,156

1040.93

1940

75,157,022

25,366,782

18,738,619

1040.62

Sources:

1955 Brewers' Almanack

Brewers' Society Statistical Handbook 1988, p.7

Brewers' Society Statistical Handbook 1973, p.11

Brewers had been perfectly aware of the likely impact of the tax increase and had warned the government. Here's one from a favourite character of mine, Calder, the canny Scot who rescued Allsopp:

"THE BEER TAX BREWER DECLARES IT "GIGANTIC BLUNDER"
A striking speech on the injury to the revenue and to British trade by the additional beer duty imposed by the Supplementary Budget was made last night by Mr. J. J. Calder, managing director of Allsopps Brewery Company, at the annual dinner of the Nottingham and Nottinghamshire Licensed Victuallers and Beer and Wine Trade Association Nottingham.

Mr. Calder declared that a gigantic mistake had been made, and that the tax, while it will fail to yield additional revenue, will seriously affect the employment brewery workers, ruin the market for barley and hops, and injure every industry which depends on the brewery trade.

The sale of beer had gone down by a percentage which was disastrous from the point of view of the revenue, of the brewer, and particularly of the licence-holder."
Western Morning News - Thursday 26 November 1931, page 8.

Slumping prioduction also had a knock-on effect on brewery profits and share prices:

"BREWERIES' SLUMP MARKET DISAPPOINTED BY BUDGET
The outstanding feature of the Stock Exchange was the sharp set-back to Breweries, the market being very disappointed at the maintenance of the beer duty.

Courages and Guinness both lost over 5/-, while Watney deferreds and Meuxs both shed 4/9. Hoares slipped back to 40/-, while Benskins, Bass, Barclays, Allsops, Ind Coopes, and Taylor Walkers all showed appreciable losses."
Gloucester Citizen - Wednesday 20 April 1932, page 12.

How did the tax rise change British beer forever? It created modern Dark Mild. For the first time standard Mild fell below 4% ABV. A place it's been ever since.

4 comments:

Strange, though, that there seems to have been no great complaint by the British drinker as his pint becoming weaker ... presumably, at a time of economic depression, the nearly 30 per cent drop in the price made up for it being weaker.

Strange, too, that the man who, effectively, watered the workers' beer wasn't a very fat capitalist but a very skinny Socialist ...

Snowden started out as a temperance lecturer. Here he is arguing that the "abolition of the liquor traffic would abolish unemployment". He would have introduced prohibition if he had thought he could have got away with it.